David Mann

Despite gloomy economic conditions in Korea, Korean Air remains bullish about its prospects.

The airline aims to increase its operating revenue to US$3.5 billion this year, up from US$3 billion in 1997. And its optimism does not appear entirely misplaced. Salomon Smith Barney's Peter Negline agrees that the predictions are bullish but not impossible. Salomon has just upgraded the airline's prospects to a neutral speculative risk from underperform speculative risk.

The slightly improved outlook is partly due to US$254 million in low interest loans thought to have been secured by equipment manufacturers keen for the airline to survive.

Negline says this support could give the airline two to three years' breathing space. According to figures obtained from Korean, the airline hopes to increase passenger numbers by 1.1 million to 26.7 million this year.

This goal could prove elusive for the carrier bearing in mind the current harsh economic conditions in Korea. Analysts point to rocketing unemployment and low consumer confidence, which are keeping down the number of Koreans travelling internationally. Domestic hardship could cause as much as an 80 per cent fall in outbound traffic and the trend is likely to continue, predict local analysts.

But Korean's bullishness could also partially be fuelled by speculation over the demise of rival Asiana. The embattled carrier, which has put its entire fleet up for sale, has recently tied up a few deals. Air Europe has bought two of Asiana's Boeing 767-300s and Delta one B767-300. Qantas is said to have bought one B747-400 and UPS Airlines is interested in Asiana's B767 freighter.

Source: Airline Business